Perfection

Question 1

Perfection defined

Answer 1

A security interest is “perfected” when it has:
1. Attached
2. Some additional step (possession or filing) is taken
Gives secured party an interest in collateral that is effective against all other creditors.

Question 2

Automatic perfection

Answer 2

Certain situations, a security interest is automatically perfected.
Most common is Purchase Money Security Interest in consumer goods.

Question 3

Perfection by possession of collateral by secured party

Answer 3

A secured party may perfect a security interest in most types of collateral simply by taking possession of it.

Question 4

Perfection by “control”

Answer 4

Security interests in investment property and electronic chattel paper may be perfected by control.

Note: Nonconsumer deposit accounts can only be perfected by control.
If secured party isn’t the bank, it can take control by:
1. putting the deposit account in the secured party’s name
2. agreement w/ debtor and bank that bank will follow secured party’s orders

Question 5

Perfection by notation on lien

Answer 5

Only way to perfect a security interest in a car is for the secured party to note its lien on the title. Or by filing a “financing statement” if lien is on inventory.

Question 6

Financing Statement

Answer 6

Document used to provide public notice of a security interest in order to perfect it. Usually through a “notice filing” that indicates someone “may” have a security interest in the collateral indicated.
*Effective for 5 years from date of filing.
Can be extended by “Continuation Statement” w/i 6 months of end date.

Question 7

Contents of Filing Statement

Answer 7

Contents:
1. Debtor’s name (has to be actual name, not a trade name). If debtor changes name, can perfect through financing statement w/i 4 months of change.

2. Description of collateral (can be “all assets” in statement, but security agreement must have particularity)
3. Secured party’s name
4. If for real property, must describe property.
5. Debtor must authorize filing (no sig needed)

In FL, filed with the Florida Secured Transaction Registry
*File in the state where debtor is located (i.e. if an individual, her principal residence)
If debtor moves, must be filed in new state w/i 4 months.
*If collateral moves locations, secured party must file financing statement in new jurisdiction w/i 1 year.

Question 8

Perfection as to proceeds

Answer 8

Secured party automatically has perfected security interest in proceeds debtor receives for collateral for 20 days.
Beyond 20 days, secured party must take new action to perfect.